By Marcus Leach

Starting next month the Government's new business bank will begin to invest in small businesses, a move welcomed by the nation's businesses.

The idea behind the bank is for the state to take over lending in sectors that banks are no longer interested in.

"For six months the Business Bank has been little more than a good idea. The Business Secretary's decision to move it from the drawing board to reality is hugely welcome to British businesses," Christopher Shaw, CEO of the alternative finance provider for business, Platform Black, commented.

"With nearly £4 billion at its disposal, the Business Bank will have the firepower needed to unblock the credit pipeline, and in so doing will help a great many vibrant businesses get access to finance.

"Its creation is also confirmation that the future of business finance will be much more diverse - it will include contributions from private sector backers and the new wave of non-bank lending channels.

"£300 million will be distributed to business via alternative finance providers - and for our industry this a chance to play a vital role in kickstarting the stagnant economy. Finally the government has had the courage to look beyond the conventional banks for a solution to the business credit vacuum.

"But the Chancellor's suggestion that he is considering boosting the Funding for Lending Scheme is less encouraging.

"Despite the funds the scheme has made available to the mainstream banks, precious few of them are being lent to business.

"There's a danger that throwing more money at this ill-starred scheme will only compound its failure. While FLS has been great for mortgage borrowers, the banks' continued reluctance - or inability - to lend to business should not be rewarded with more government funds.

"With its ability to channel funds from a variety of sources, as well as offer advice to firms that need help to keep on top of cash-flow, the Business Bank offers a much more comprehensive and credible way to unblock the business lending market.

"The UK is the only G8 country without an institution of this type, and its arrival cannot come soon enough."

Join us on
Follow @freshbusiness